GLOBAL MARKETS-Investors look for Fed comfort amid Russia-Ukraine tensions

LONDON, March 19 Wed Mar 19, 2014 8:29am EDT

LONDON, March 19 (Reuters) - The world's major stock, currency and bond markets steadied on Wednesday as investors focused more on an upcoming U.S. Federal Reserve policy decision than the continuing military tensions between Ukraine and Russia.

The U.S. central bank is expected to trim its bond-buying stimulus by $10 billion a month for a third time in a row later on Wednesday, as well as update its guidance on when interest rates will eventually rise.

The policy of steadily scaling back stimulus, while likely noting the economy's recent weakness is not solely down to harsh winter weather, should soothe any concerns investors might have had surrounding new Fed Chair Janet Yellen's first policy-setting meeting.

This shift in focus towards the Fed away from geopolitical concerns over Russia and Ukraine put a floor under stocks, which had opened lower following a strong start to the week.

It kept U.S. Treasuries and the dollar largely unchanged on the day within narrow ranges.

"European equities are taking a breather following strong gains earlier in the week," wrote Barclays strategists in a note to clients on Wednesday.

"Markets responded positively to the reassurance from Russian President Vladimir Putin that Russia does not need further division of Ukraine. More serious economic sanctions are possible but will take longer to get set up, so risk assets are not entirely out of the woods," they added.

Early on Wednesday, pro-Russian units took control of a naval base in Ukraine, in the clearest sign so far that Russian soldiers had begun to take control of Ukrainian military facilities across the Black Sea peninsula.

Ukraine's acting Defence Minister Ihor Tenyukh said in response that his forces would not withdraw from Crimea.

British Prime Minister David Cameron raised the international stakes, telling parliament that Western allies should discuss whether to expel Russia permanently from the G8 group of nations if Moscow takes further steps on Ukraine.

By 1200 GMT, the FTSE Eurofirst index of the leading 300 European stocks was up 0.2 percent at 1,309 points.

Germany's DAX was up 0.7 percent at 9,308 points, boosted by a 7 percent surge in shares of BMW - Europe's biggest gainer - after the automaker said it expects profits to rise this year.

UK BUDGET

Britain's FTSE 100 was down 0.1 percent at 6,599 points.

In currencies, the dollar index, a measure of the greenback's value against a basket of six major currencies, was flat at 79.419.

The dollar was up about 0.1 percent on the day at 101.50 yen , the Japanese currency showing little reaction to Japan's larger-than-expected trade deficit.

The euro was little changed around $1.3930, unable to scale last week's 2-1/2-year high of $1.3967, and was down almost half a percent against sterling at 83.61 pence.

It's a busy day for UK-focused traders and investors, with British finance minister George Osborne announcing a pre-election budget that is likely to offer some tax relief to voters but will stick closely to his tough decade-long plan to fix the public finances.

The British jobs market showed signs of improving further in February and the latest Bank of England minutes said policymakers believe the economy continues to recover, both pointing to interest rates potentially rising earlier than had been expected.

"The combination of BoE minutes and labour market data are generally favourable for the pound," said Citi strategist Valentin Marinov.

In metals, profit-taking continued to push gold lower. It was last down 0.7 percent at $1,346 an ounce, slipping further back from a six-month high of $1,391.76 hit on Monday.

Underlying worries over China's financial and property sectors bubbled to the surface, weighing on Asian markets.

Chinese stocks dipped and the yuan fell to its weakest level in a year through 6.20 per dollar, the first time it has traded more than 1 percent beyond the midpoint set by the central bank after the daily trading band was widened to 2 percent. (Reporting by Jamie McGeever; Editing by Sophie Hares)

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